As your company grows, you’ve probably noticed that acquiring new customers has become increasingly challenging. The traditional business-to-business (B2B) growth strategy of prospecting sales isn’t as effective as it was a decade ago. Today, winning in B2B growth requires a focus on building awareness and demand. To succeed, you need to put your product front and center, structuring your growth strategy around the value it provides to users. Read on to learn how to turn your business into a powerful product-led company.
What is Product-Led Growth?
Product-led growth (PLG) centers your marketing strategy around the product experience. The product itself drives user acquisition, growth, conversion, and retention. This approach is particularly popular in the B2B software-as-a-service (SaaS) industry. By placing the product experience at the heart of your marketing efforts, you leverage features like a freemium model to attract users without costly ad campaigns, enticing them to upgrade to paid versions by showcasing enough value.
Product-Led Growth vs. Sales-Led Growth
A 2022 study revealed that 91 percent of SaaS companies planned to increase their investment in PLG, with almost half aiming to double their investment. While sales-led growth, which relies on one-to-one human support, has its merits, it is difficult to scale.
Sales-led models allow for personalized onboarding and relationship-building, which is beneficial for enterprise-level organizations using complex programs. However, PLG marketing strategies automate key onboarding, support, sales, and marketing tasks, encouraging users to try the app with minimal financial commitment. This approach widens the top of your sales funnel and lowers your customer acquisition cost (CAC), making PLG a more sustainable growth model.
Explaining the Product-Led Growth Flywheel
A flywheel is a cycle of processes that feed into one another, improving continuously. In the PLG flywheel, enhancing the customer journey drives engagement and user acquisition, with insights from new users improving future customer success.
- Activate: At this stage, prospects evaluate your product to see if it solves their problems. Ensure they reach their first success moment quickly to hook them.
- Adopt: Users begin exploring more features, integrating the product into their workflow. Provide support to encourage deeper usage.
- Adore: Users become regulars, relying on your product for routine tasks. Continually deliver value to keep them engaged.
- Advocate: Loyal users recommend your product, bringing in new customers and restarting the flywheel. Show appreciation to maintain their advocacy.
Product-Led Growth Metrics to Track
Revenue-focused marketing teams must track the right metrics to ensure the success of their PLG model:
- Time to Value (TTV): The time it takes for users to experience their first success with your product.
- Product-Qualified Leads (PQLs): Users in the adoption stage who are most receptive to sales efforts.
- Expansion Revenue: Revenue from upsells, cross-sells, and add-ons to existing customers.
- Average Revenue per User (ARPU): The average revenue generated per active user.
- Customer Lifetime Value (CLV): The total revenue expected from a customer over their relationship with your company.
- Net Churn Rate: The revenue lost from cancellations and downgrades.
- Virality and Network Effects: The exposure and value gained as more users join and discuss your product.
Product-Led Growth Examples
SurveyMonkey: Uses simple tactics like frictionless logins and branded surveys to create network effects, contributing significantly to its parent company’s revenue.
Dropbox: Leveraged a demo video and incentivized sharing for user acquisition, leading to over 700 million registered users with 15 million paying for premium services.
How to Build a Product-Led Growth Strategy
A common PLG strategy is the “freemium” model, offering a basic free version with optional premium upgrades. Ensure your free version enables users to accomplish basic tasks, and optimize pricing based on perceived value during product use. Continuously improve the user experience to reduce friction and enhance metrics like TTV.
Boost Your Company with Product-Led Growth
As your company expands, sales-led growth becomes less sustainable. Transitioning to a product-led growth strategy early on can help maintain momentum. Tools like Leadfeeder provide valuable insights into visitor behavior, helping you optimize the user experience and improve retention metrics. With a solid base of PQLs, you can leverage marketing campaigns to amplify growth through virality and network effects.
By focusing on making your product the center of your growth strategy, you can achieve sustained expansion and success.
